Stanbic IBTC: FRC restrained from sanctioning KPMG

A Lagos Federal High Court has given an order restraining the Financial Reporting Council of Nigeria, FRCN, and its Chief Executive Secretary and CEO, Mr. Jim Obazee, from taking any action, sanction or measure against KPMG Professional Services, and Mr. Ayodele Othihiwa, a Partner firm, pending the hearing and determination of the suit filed by the applicants.
The court, presided over by Justice Ibrahim Buba, gave the order on Friday, in a fundamental rights application filed and argued before the court by KPMG.
KPMG in the fundament rights application filed and argued before the court by Chuka Ikwuazo of the law firm of Aluko and Oyebode, urged the court to restrain FRCN and its CEO from taking any sanction and also order an accelerated hearing of the suit.
The matter has now been fixed for November 12, when the respondents must have been served all the ‘originating processes’ in the matter.
The interim order was the second granted by Justice Buba-led court against the FRCN, within 48 hours. The court had on November 4, also ordered the FRCN to maintain the status quo in a related case filed by Stanbic IBTC.
KPMG and its partner had filed an application for the enforcement of their fundamental rights, following the FRCN’s letter of October 26, which it called a final notice and its ‘regulatory decision’ conveyed in another letter of October 30, on the financial statements of Stanbic IBTC Holdings Plc for 2013 and 2014.
One of the FRCN’s decisions had suspended Othihiwa “until the investigation as to the extent of the negligence of KPMG Professional Services is ascertained”.
However, the plaintiffs have contended that the decision was published and issued without informing or notifying them of the nature of the allegations made against them and inviting them to respond to the allegations.
Both KPMG and Othihiwa had claimed that FRCN’s decision not only violated their constitutional right to fair hearing, but also Section 62 (2) of the FRC Act, which spells out the procedure to be adopted in investigating a professional body for any ‘complaint or dishonest practice, negligence, professional misconduct or malpractice’.
The section, according to the plaintiffs, states; “FRCN shall notify the professional whose conduct, act or omission is under investigation of the nature of the complaint and it shall summon or hear the professional.’’
The applicants also contended that the defendants did not only breach this section, but they also breached Section 15(2) b of the FRC Act, which states that a Technical and Oversight Committee shall review “sanctions to be meted out to any professional accountant, professional or public interest entity”.
The plaintiffs further claimed that even where the Technical and Oversight Committee had ratified the decision of the FRCN, the council had failed to exhaust the provisions of its own law, by allowing them to exercise their right of appeal to the Technical Committee and by subjecting its decision to the approval of the FRC board, and at the moment, FRC has no board since July 16.
“In effect the respondents purported to make and they seek to enforce the aforesaid ‘regulatory decision’ at a time when the statutory means of recourse stipulated under the Act does not exist”, KPMG and Othihiwa stated in their application.
Both KPMG and Otihihiwa are asking the court for accelerated hearing, while saying that that they have been adversely affected and have the potential of suffering greater loss of business opportunities and turnover of business, as a result of the action of the FRC, which they consider unfair, ultra vires and a breach of their fundamental rights to fair hearing.
Consequently, Justice Buba adjourned till November 12 for hearing of the motion for interlocutory injunction.
The court case was the second reaction of KPMG Professional Services to the decisions of FRCN.
Last week, KPMG’s Chief Operating Officer, Mr. Yomi Sanni, faulted the decisions, saying his firm complies with the requirements of all regulations, acts and policies that govern its business and still stands by its audit opinions on Stanbic IBTC Holdings.
“We wish to state categorically that KPMG does not agree with the decision taken by the FRC, as it does not reflect the true position in this matter. Our position is that the decision of the council is erroneous on its merits and the process that led to it, is significantly flawed and not in compliance with the requirements of the FRC Act,” Sanni said.